The Austrian Supreme Court (OGH) seeks clarification in a preliminary ruling procedure (6 Ob 69/24a) concerning the interpretation of EU Sanctions Regulation (EU) No 269/2014. Specifically, the question arises as to how the restrictive measures laid down in this Regulation affect the rights of listed persons as shareholders, particularly with respect to participation in the general meeting and the exercise of voting rights.

In addition to a prohibition on making funds and economic resources available to listed natural or legal persons (the prohibition of making funds available under Art 2(2)), the EU Sanctions Regulation also imposes an obligation to freeze funds and economic resources belonging to or owned by such listed persons (the freezing obligation under Art 2(1)). Against this background, it must be clarified how the term “freezing of funds” in Art 1(f) of the EU Sanctions Regulation is to be interpreted and the extent to which corporate administrative and control rights, such as voting rights, fall within the scope of the freezing obligation.

According to its wording, freezing means preventing any form of movement (1), transfer (2), alteration (3), use of (4), access to, or dealing with funds in any way (6). The definition does not end with this enumeration. It is followed by a relative clause (German language version of Regulation (EU) No 269/2014): “wodurch das Volumen, die Höhe, die Belegenheit, das Eigentum, der Besitz, die Eigenschaften oder die Zweckbestimmung der Gelder verändert oder sonstige Veränderungen bewirkt werden, die eine Nutzung der Gelder einschließlich der Vermögensverwaltung ermöglichen.” The German wording leaves unclear whether the affected shareholder is excluded from any of the forms of use listed or only with respect to those resolutions that pursue the objectives described in the relative clause.

The Austrian proceedings: Exclusion of the shareholder (6 Ob 69/24a)

The claimant is a limited company with its registered office in the Russian Federation, held by a person who is listed on the European sanctions list. It is a shareholder of the defendant Societas Europaea with its registered office in Austria. The claimant was completely excluded from participating in the general meeting and from exercising voting rights, with reference to the freezing obligation under the EU Sanctions Regulation. The items on the agenda concerned the discharge of the management board members, the expansion and election of the supervisory board, and the acquisition and disposal of treasury shares with the exclusion of shareholders’ subscription rights.

As a first question for the preliminary ruling, the OGH seeks clarification on whether the voting right of a sanctioned shareholder at the general meeting must not be exercised—regardless of the subject matter of the resolution. A key argument for a complete exclusion of voting rights and participation in the general meeting is seen by the OGH in the wording of Art 1(f), which covers “any form” of the uses listed therein. However, the OGH also notes that the relative clause in Art 1(f) could be interpreted to mean that a sanctioned shareholder may indeed vote on resolutions that do not bring about changes within the meaning of that clause.

In the alternative, the OGH seeks clarification on whether the resolutions in question fall under the concept of “freezing of funds” and whether the sanctioned shareholder is at least entitled to a right to attend the general meeting.

Possible solutions

The prevailing view is that freezing shares causes all shareholder rights—hence also all control rights—to be suspended. The Council of the EU’s Best Practice Handbook, the guidelines and the FAQs of the European Commission follow a broad understanding of freezing and prohibit any use of shares that could enable the exercise of rights attached to them.

Literal and teleological interpretation

According to the case law of the ECJ, EU law must be interpreted autonomously and teleologically. Sanction regulations are interpreted extensively in order to ensure their full effect (effet utile). The aim is to completely prevent economic benefits for listed persons, which also includes the suspension of voting rights.

Comparison of language versions

The English version makes it clear that any use is prohibited.

“Freezing of funds means preventing any move, transfer, alteration, use of, access to, or dealing with funds in any way that would result in any change in their volume, amount, location, ownership, possession, character, destination or any other change that would enable the funds to be used, including portfolio management.”

Importantly, due to the sentence structure, the relative clause appears at the very end of the definition of freezing of funds and grammatically refers to the action “dealing with funds”, not the preceding actions such as “move”, “transfer”, “alteration”, “use of”, or “access to”. This distinction indicated that while all forms of dealing with funds are captured by the relative clause, the other uses are comprehensively prohibited by the enumerated actions themselves.

Systematic interpretation

An understanding that covers only property rights but not voting rights would deprive Art 2(2) (the prohibition of making funds available) of its independent scope. For systematic reasons, such an interpretation is therefore untenable.

CFSP- and fundamental-rights-compliant interpretation

Since the underlying CFSP decisions contain no definition, there are no substantive limits to the Union law concept. Even an interpretation consistent with fundamental rights (Art 16 and 17 CFR) does not preclude the suspension of rights, as this constitutes the least intrusive means of achieving the sanctions’ objectives.

Will the ECJ follow the anticipated course?

Sanctions were once the ultima ratio, a foreign-policy tool of last resort reserved for exceptional crises. Today, they have long become part of day-to-day legal practice: they no longer concern only states or individual natural persons, but now also deeply affect corporate structures and shareholder rights. How the ECJ ultimately clarifies the concept of “freezing” therefore goes far beyond the individual case and will reveal how powerful Europe’s sanctions apparatus has become—and how narrow the room for legal interpretation now is.